MSRB Chair Testifies Before Senate Banking Committee

Date: March 26, 2009

Contacts:        Jennifer A. Galloway, Chief Communications Officer
                      (703) 797-6600

Testimony Focuses on Unregulated Parties and Municipal Market Disclosure

Alexandria, VA - In testimony today before the U.S. Senate Committee on Banking, Housing and Urban Affairs, Municipal Securities Rulemaking Board Chair Ronald A. Stack emphasized the importance of transparency and disclosure in the municipal market, and the danger of gaps in the regulatory structure that governs U.S. financial institutions and their products.  He said regulatory reform is necessary to address changes in the municipal markets, such as the creation of new financial products and the emergence of firms providing advice regarding these products.

"The municipal securities marketplace has evolved from one in which states and municipalities offered traditional, fixed rate bonds to finance specific projects into a market that involves the use of complex derivative products and intricate investment strategies," Chair Stack said in written testimony before the Committee.  "Current federal law does not permit the MSRB to regulate the swap firms that assist in the creation of these derivative products for municipal issuers. The law also does not permit the MSRB to regulate other non-dealer municipal market participants, such "independent" financial advisors that provide advice to issuers regarding bond offerings or investment brokers that assist issuers with investing bond proceeds."

Chair Stack said the MSRB believes regulation of these entities and other municipal advisors is essential to protect investors and ensure market integrity. "The MSRB believes that its current regulatory structure for municipal securities dealers provides a ready model for oversight of municipal advisors, including financial advisors and investment brokers."  He added that such expanded oversight would be most effective in a dual regulatory structure with the SEC. Under this approach, firms would be required to register with the SEC, and the MSRB would provide more prescriptive rules applicable to these firms and their activities.

Chair Stack also emphasized the overwhelming importance of transparency and disclosure in the municipal market.  "The MSRB has long sought to improve investor access to municipal securities disclosure as well as to require, through its dealer regulation, that the municipal securities market continue to be fair to investors and efficient for all market participants," he said.  The MSRB's Electronic Municipal Market Access system ( is providing for far more timely and accurate disclosures, valuations, and information regarding municipal securities, which will benefit all market participants.  "EMMA’s free public access to real-time trade price information and to the key disclosure documents has already provided unprecedented transparency to this market," Chair Stack said. "As we complete each new phase of EMMA, the MSRB will provide increasing levels of transparency that will greatly benefit both investors and issuers alike and which is unparalleled in other markets."

Please click here to read written testimony submitted to the Senate Banking Committee or here for oral comments delivered to the testimony by MSRB Chair Ronald A. Stack.

The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is overseen by the Securities and Exchange Commission and Congress.